Can Tender Conditions Be Relaxed Due to Bank Strikes? Supreme Court Clarifies

Introduction

The Supreme Court of India recently addressed a significant issue regarding the rigidity of tender conditions in the case of M/s Om Gurusai Construction Company vs M/s V.N. Reddy & Ors. The Court examined whether the tendering authority could accept a performance security submitted after the stipulated deadline due to a nationwide bank strike. This ruling has important implications for how tender conditions are interpreted and enforced, particularly in light of unforeseen circumstances.

Case Background

The case arose from a tender issued by the Executive Engineer, Lower Wardha Project Division, for construction work. The appellant, M/s Om Gurusai Construction Company, was declared the lowest bidder after the financial bids were opened. According to Clause 2.22.0 (ix) of the tender conditions, the appellant was required to submit additional performance security within two working days of the bid opening. However, due to a nationwide bank strike on the days leading up to the deadline, the appellant was unable to submit the security until one day after the deadline.

What The Lower Authorities Held

The High Court ruled against the appellant, stating that the conditions of Clause 2.22.0 (ix) were mandatory and could not be relaxed. The Court emphasized that the tendering authority had no power to extend the time specified in the clause, which warranted strict compliance. The High Court's decision was based on the premise that the appellant's failure to comply with the deadline constituted a breach of the tender conditions, leading to the cancellation of the work order.

The Court also noted that another bidder had successfully submitted their performance security on time, which further reinforced the High Court's position that the appellant should have done the same.

The Court's Reasoning

Upon appeal, the Supreme Court examined the High Court's interpretation of the tender conditions. The Court highlighted that the rigid application of tender conditions could lead to unjust outcomes, particularly when unforeseen circumstances, such as a bank strike, hinder compliance. The Court referenced the classic legal maxim lex non cogit ad impossibilia, which means that the law does not compel a person to perform an impossible task.

The Supreme Court found that the appellant had complied with the tender conditions to the best of their ability, given the circumstances. The Court noted that the tendering authority had accepted the additional performance security after verifying the existence of the bank strike, which justified the acceptance of the security submitted on 17.03.2021.

Statutory Interpretation

The Supreme Court's ruling underscores the importance of interpreting tender conditions in a manner that aligns with the principles of justice and practicality. The Court emphasized that decision-making authorities, such as the tendering authority, should not ignore compelling realities that affect compliance with tender conditions. The interpretation of Clause 2.22.0 (ix) should consider the context in which it is applied, rather than adhering to a rigid, literal interpretation.

Constitutional or Policy Context

The ruling also reflects a broader policy consideration regarding the role of judicial review in tender matters. The Supreme Court cautioned against unnecessary judicial interference in tender processes, emphasizing that courts should respect the discretion of authorities unless there is clear evidence of mala fides or irrationality in their decisions. This approach aligns with the principle of promoting public interest and ensuring that public works are not unduly delayed by technical grievances.

Why This Judgment Matters

This judgment is significant for legal practitioners and public authorities involved in tender processes. It establishes that tender conditions should not be interpreted in a manner that disregards practical realities. The ruling encourages a more flexible approach to compliance, allowing for exceptions in cases where unforeseen circumstances prevent adherence to strict timelines. This flexibility is crucial for ensuring that public projects can proceed without unnecessary delays, ultimately serving the public interest.

Final Outcome

The Supreme Court set aside the High Court's order and upheld the acceptance of the additional performance security submitted by the appellant. The Court directed that the writ petition filed by the first respondent be dismissed, thereby allowing the appellant to proceed with the awarded work.

Case Details

• Case Title: M/s Om Gurusai Construction Company vs M/s V.N. Reddy & Ors.
• Citation: 2023INSC760
• Court: IN THE SUPREME COURT OF INDIA
• Bench: Justice K.V. Viswanathan, Justice J.K. Maheshwari
• Date of Judgment: 2023-08-23